Jurisdiction - Korea
Reports and Analysis
Korea – Lawmakers Pass Anti-Corruption Legislation.

12 March, 2015

 

 

In an article published in November, 2014, we noted that the South Korean National Assembly was reviewing proposed changes to the country’s domestic anti-corruption regime.

 

On 3 March, 2015, the National Assembly passed the “Act on the Prohibition of Illegal Solicitations and the Prevention of Conflicts of Interest of Public Officials” (the “Act”). The Act is also known as the “Kim Young-ran Law”, after the former head of the Anti-Corruption and Civil Rights Commission who first proposed the legislation in 2011. The Act introduces stringent controls over the activities of public officials, in particular where those activities may lead to conflicts of interest, together with severe sanctions for those found guilty of offering or accepting bribes or other gifts.

 

The Act prohibits the solicitation of public officials and provides protection for whistleblowers. Illegal solicitation under the Act includes any solicitation that impedes the proper performance of public officials’ duties by having them violate laws or abuse their position or authority. Importantly, the Act allows for the prosecution of public officials who accept a bribe or gift, even if it was not connected to the conduct of their duties and there was no quid pro quo. Benefits covered by the Act include not only monetary payments but other gifts such as expensive meals, wines, holidays or tickets to sporting and other events.

 

The Act has broad application, with “public officials” defined to include civil servants and court officials together with employees of central and local governments and government-owned institutions. More controversially, the law will also apply to journalists, employees of public schools and directors and teachers at private schools.

 

Individuals who accept cash or gifts valued at more than one million won (approximately USD 900) at any one time face imprisonment for up to three years or a fine of up to 30m won. An individual who accepts cash or gifts valued at more than one million won but less than three million won during any given fiscal year can be fined between two and five times the value of the bribe.

 

The Act has also introduced the concept of corporate liability for private companies. Article 24 provides that where a representative, agent or employee of a corporation or organisation violates the Act, then the corporation or organisation may also be liable to a similar fine to that imposed on the individual, representative, agent or employee. The corporation or organisation does have a defence if it can demonstrate that reasonable procedures were in place to prevent violations of the Act.

 

Importantly, there is no requirement of a quid pro quo for the statute to be implicated. As mentioned above, the new law removes the evidentiary requirement to prove a direct link between the acceptance of a gift and a subsequent favour. The failure by the prosecution to demonstrate such a link had led to the collapse of a number of high profile trials in recent years that had involved allegations of corrupt activity.

 

The Act will require companies to introduce changes to their policies covering government relations. This is particularly significant in a culture where the giving and receiving of “red” envelopes and other gifts are an integral part of the business culture. The Act is due to come into effect in October 2016. Companies operating in South Korea are well advised to undertake a comprehensive review of their policies covering dealings with government officials to ensure compliance with the Act.

 

herbert smith Freehills

 

For further information, please contact:

 

Kyle Wombolt, Partner, Herbert Smith Freehills

kyle.wombolt@hsf.com

 

James Doe, Partner, Herbert Smith Freehills

james.doe@hsf.com

 

Lewis McDonald, Partner, Herbert Smith Freehills

lewis.mcdonald@hsf.com

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